Determine If It Is Appropriate to Use the Normal Distribution

question 73

Essay

Determine if it is appropriate to use the normal distribution to approximate a binomial
distribution when n = 41 and p = 0.6.

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Definitions:

Maturity Risk

The risk associated with the changing value of securities due to the time remaining until their maturity date.

Yield to Maturity

The total return anticipated on a bond if it is held until the maturity date, factoring in the current price, par value, coupon yield, and time to maturity.

Coupon Rate

Each year, the interest rate a bond yields, expressed in terms of the percentage of its face value.

Premium

A premium is the amount by which the price of a security or financial instrument exceeds its intrinsic or face value.